Oil hits $139 as jobless figures stun US
Pastor Dale Morgan
*Oil hits $139 as jobless figures stun US*
· Biggest rise for 22 years in unemployment
· Shares and hopes of dodging recession tumble
* Ashley Seager
* The Guardian,
* Saturday June 7 2008
Oil prices leaped to another record high yesterday as Israel warned Iran
about its nuclear sites and the dollar slumped on news of the biggest
jump in US unemployment for 22 years.
Global crude ended a run of lower prices as it jumped by more than $11 a
barrel to more than $139 - it has risen more than $17 in two days. The
price eventually settled at $138.54. On Wednesday the price had fallen
to as low as $122.
Already jittery oil markets were sent into spasm by remarks from
Israel's transport minister that an attack on Iranian nuclear sites
looked "unavoidable". Any attack on the country would threaten supplies
from the whole region.
Prices were also boosted by a prediction from investment bank Morgan
Stanley that crude may reach $150 by July 4.
Earlier in the day the dollar had fallen against the euro partly on
speculation that the European Central Bank may consider raising interest
rates to curb inflation. Then markets were rocked by a report showing US
unemployment suffered its biggest monthly rise for 22 years.
Shares dived after the US unemployment rate unexpectedly jumped to 5.5%,
intensifying fears that the world's biggest economy is sliding into
recession. The Dow Jones industrial average lost nearly 400 points, more
than 3%, to close at 12,209. In London, the FTSE 100 closed the week
down 1.5%, or 88 points, at 5,906.
The US Labor Department said non-farm payrolls fell by 49,000 in May
from the month before. That was broadly in line with expectations but
the department revised its April figure to show a drop of 28,000 rather
than the 20,000 estimate it made last month.
The unemployment rate jumped from 5% in April to 5.5%, the biggest rise
since February 1986 and the highest rate since October 2004. As stocks
tumbled, so did the dollar, which shed nearly a cent against the euro.
Bond prices moved sharply higher as expectations of any near-term
increase in interest rates subsided. Gold futures jumped 2%, to $891 an
ounce as investors, taking fright, sought a safe haven.
There were substantial job losses last month in construction industries,
where 34,000 cuts were made, in manufacturing, where 26,000 jobs were
lost, and among providers of professional services, where 39,000 jobs went.
"The overall trend is clearly weakening, with the unemployment rate
having increased by a full percentage point over the past 12 months,"
said James Knightley, an economist at ING Financial Markets. "This will
continue to depress consumer spending - the fiscal package is being
fully swallowed by higher gasoline prices - and will, in our view, help
to keep activity depressed for longer than financial markets are
currently discounting."
Nigel Gault, chief economist at Global Insight, said: "The rise in
unemployment throws some cold water on the idea that the Fed will soon
raise interest rates to prop up the dollar and rein in inflation. The
Fed is in a difficult spot with first-half growth not far above zero,
but inflation climbing. We believe that the economy is too fragile for a
rate hike before 2009."